Financial disclosure is a broad term that is used to describe the process of providing public access to financial information. Public officials are often required to make disclosures of this type. This includes both elected officials and individuals who are running for public office. Most countries have disclosure laws that govern the process of when and how an individual or entity should make disclosure of financial information, especially when this disclosure is considered important for making decisions that impact other people.
The main purpose of disclosure regulations is to make sure there is no abuse of the public confidence taking place, and that there are no apparent conflicts of interest between the financial holdings of a public official and the responsibilities that the official is entrusted to carry out. The range of documents that are required as part of the financial disclosure vary from one country to another. However, it is not unusual for such documents as annual tax returns, general banking information, and public disclosure of properties owned as well as any investment activity to be made available for public scrutiny.
Along with public officials, people who work in the financial sector are also subject to laws regarding financial disclosure. Because professionals working in a bank or a brokerage are privy to a great deal of information before it is provided to the general public, there is always the chance that someone will use this insider information to gain financially from that data. By requiring financial disclosure on at least an annual basis, it is much easier to identify any situations where some sort of abuse of proprietary information took place and take any legal action deemed appropriate.
In the event that an individual or other entity fails to comply with financial disclosure regulations put in place by the state or national government, an investigation will usually ensue. If the failure to disclose information is found to be intentional, there is a good chance that a charge of disclosure fraud will be filed. Penalties for this type of activity can include heavy fines as well as some time spent in prison.
In the financial world, most brokers and others who are responsible for managing the resources of clients are required to file annual disclosure statements. In the United States, this process is often structured to comply with provisions put in place by the National Association of Securities Dealers, commonly known as the NASD. By structuring state and federal financial disclosure laws to include the provisions of existing NASD disclosure protocols, the government helps to support the Association in its attempts to police its own members and maintain a high level of integrity and ethics within the profession.
